The automobile industry in the US is one of the largest in the world. The history of the automobile industry dates back to the 1890’s. Since its start it has undergone massive evolution to become the largest in the world. This is attributed to the large size of market available domestically. It is also successful due to the use of mass production. Until 1980, the U.S. was the largest producer of automobiles. It was dethroned by Japan in 1980. This was followed by the subsequent overtaking by the Chinese automobile industry in 2008 though this is greatly attributed to the economic crisis in 2007. Currently the United States of America is ranked as the second largest manufacturer globally with an annual production volume of over 8 million automobiles.
The U.S. Automobile Industry
The automobile industry started with a couple of manufacturing companies in its infancy. This was back in the 1890’s. In the next thirty years three companies carved a niche for themselves in the automobile market and by the end of the 1920’s the industry was dominated by three manufacturers. The three companies are General Motors, Ford and Chrysler. They are commonly referred as the big three. Their rise was also facilitated by the improvement of the United States road system in the 1920’s.
General Motors also known as GM was established back in 1908 September 16th in flint Michigan, by a former carriage maker known as William Durant. Durant, who had in 1904 taken control of Buick initially, acquired Oldsmobile and Pontiac (formerly known as Oakland) in the year 1908. GM was being formed as a holding company for Buick. In 1909, GM acquired Cadillac along with other car part supplier companies and car companies. In its infancy GM was faced with a myriad of financial problems. In 1910, by over-extending the company with its acquisitions in a bid to merge with Ford, Durant lost control of GM and it was taken over by a group of banks who ousted Durant. This did not kill his spirit. William Durant and Louis Chevrolet founded Chevrolet in 1913. The new automobile company, reaping from Durant’s past experience in the automobile industry, became very successful. In the period between 1913-1915 Durant, who was still interested in his former company, started acquiring the stocks in GM. By the end of this period he had majority of the control. Chevrolet was acquired by GM in 1917 putting Durant back at the helm of the company.
Currently GM still holds the position as one of the largest automobile manufacturer both in the United States and in the world. It has production facilities in 37 countries with ten brands of automobiles under its name. These are Cadillac, Opel, Holden, Vauxhall, Wuling, Baojun, Chevrolet, Buick, GMC Jie Fang and Uz Daewoo. GM has the largest history of global success. It held the top position in global sales for 77 consecutive years. This is the period between 1931 and 2007. Its successful overseas involvement projects are in purchasing of Germany’s Opel in 1929, purchasing of the Australian Holden company in 1931 and that of England’s Vauxhall Motors in 1925. GM is also a leading company in innovation in modern automobile technology with annual model changes suited for more comfort and inclusion of more features and adaptability in many road conditions.
Marketing, pricing and promotional strategies
In the late 1920’s the corporate structure of Ford motor company was restructured. General Motors’ management became decentralised and there were several separate divisions for each pricing division. This enabled the company to have a proper marketing department. In 2013 General Motors formulated one of the most successful global marketing strategies in the automotive industry. This model is designed to align all global retail operations behind a single entity known as “Find New Roads”; a visions and communications platform. This is aimed at not only securing a niche in the United States of America market but also in the global market. It is designed to serve over 140 countries this is a very ambitious model whose results are already beginning to show with the company posting good sales in the overseas market (Canadian auto dealer, 2014). It shows the company’s commitment in doing the right thing for the customers. The company has developed this marketing strategy in line with improvement of the retail experience of customers to promote its vision of taking over the global market.
The company also employs the services of a global advertising agency known as commonwealth. This agency that has presence all over the world advertises the General Motors brands all over the world. This coupled with “Find New Roads” has enabled the company to propagate an external marketing message and also concentrate and rally around a single consistent theme for all brands; that of improved customer retail experience and global presence.
The company is also very successful in customer oriented marketing strategies that aid in customer retention and also to create customer loyalty. The pinnacle of customer oriented marketing in the establishment of General Motors Acceptance Corporation (GMAC Inc.) in 1919 which provided incentives to customers in form of credit services i.e. auto financing. The company is currently known as Ally Financial Inc. This company with over 15 million global customers provides financial services to GM customers. This includes financing and insurance. This bold step earned the company a lot of loyal customers and ensured the retention of such customers. GMAC Inc. is one of the most successful financial institutions that provide auto financing. It finances both the customers and the dealers. While helping GM to market its product, the corporation also leads to financial returns for GM which has equity in the company.
GM pricing strategy is through competitive pricing. In 2006-2007 GM cut prices at an average of $1,300 on 57 models. This was meant to maintain significance in the market that was being flooded by Asian models. Through competitive pricing and the introduction of newer models annually with a competitive price tag, GM has been successful in being the leading automobile manufacturer in the U.S. The company has also been involved in the World Touring Car Championship (WTCC) over the years. This gives the company exposure and markets it as a leading brand.
Ford Motor Company is one of the largest car manufacturers in the United States and also globally. It was established and incorporated by Henry Ford in the 1903 June 16th. The Ford Company is credited for its improvement of mass production by its conveyor belt based assembly line that was premiered in1913. This kind of an assembly line greatly increased production speed and reduced the automobile production cost quite significantly. Henry Ford built his first experimental car model in 1896 before he had even established the Ford Company. The model was basically a twin cylinder engine which could clock speeds of up to 20 mph. This was a high level of craftsmanship and exemplary skill. The first automobile produced under Ford Company was the model A. The first produced units sold for $850 each. In its pioneer season the model sold 1,708 units. This was followed by the introduction of motor vehicles mainly built for speed. These were the 999 in 1904, model C in 1904, model B in 1904, model K in 1905, model N in 1906 and model T in 1909. Model T also known as Tin Lizzie was so popular with the American users because of its $890 price, engine size, fuel consumption and its ability to clock a speed of 40 mph.
Today Ford has more than a dozen brands including Thunderbird, Model T, Fairlaine, Galaxie, Falcon, and Mustang. It also has some of the most popular four wheel drive pickup trucks and all-terrain vehicles with models under this category being Bronco, Jeep, F series, and Ranger. The Ford company is ranked as the second largest automobile producer in the U.S. and fifth globally. Commercial vehicle models are sold under Ford while its luxury models are sold under Lincoln.
Marketing, pricing and promotional strategies
In 2008 Ford’s leadership noted that the customer population was being taken over by the digital revolution. The leadership deduced that digital marketing and digital communications was going to be an important and vital component of their marketing in the near future. Following this observation Ford integrated social media into its marketing model. Under this model that uses social networking as a marketing strategy, workers in the company were informed of the message the company wishes to pass to the customers. The employees then go back to their customers and communicate the corporate marketing message in their own words. The beauty of this marketing strategy according to the Ford leadership is that there is consistency in the marketing content that is passed to the consumers across different social media platforms according to their preference of the social network/s of choice. This means that the same message reaches the young consumers and the older consumers. Also the same message gets to the male consumers as it gets to the female consumers. Similarly the same information is passed to all parts of the world regardless of the language used in such a particular place or the geographical characteristics. The additive effect of all this is that all consumers will see the same Ford in all social media platforms from Facebook pages to Instagram, from banner ads to twitter profiles, from promoted tweets and trends to ads.( Ferrell, 2012. Maria, 2001)
Ford is also very successful in the use of consumer oriented marketing strategies. In the early years of production, when the company used to sell model T, customers could have any colour they wanted. Despite the challenge that it took five days for the fresh coat of paint to be painted and allowed to dry to a glossy finish, their bid paid off because customers were won over by the fact that they could get a colour coat that they wanted. Many other companies especially those that were not part of the big three usually offered black models hence they were not popular with those customers that wanted to stand out. Today this mode of customer oriented marketing is also used especially for the luxury brands. By just visiting the Ford website the customer is offered a wide range of personal customisation packages for a brand of choice e.g. a mustang. Though this comes at an extra cost a majority of customer are willing to pay the extra price to get extra features and comfort that is not available in the custom model. In so doing Ford is able to achieve customer retention and also have customer satisfaction. This mode of customer oriented marketing has enabled the company to also colonise the overseas market. Customers living where there is rugged terrain can customise an aesthetically appealing model to perform in such terrain hence they will not have to sacrifice the beauty of their models for adaptability, agility and strength (Betz, 2002).
Ford’s pricing is usually centred on sustainability. The company has some of the leading high profile luxury vehicles under the Lincoln brand. By targeting the high cost market and creating relative scarcity especially during the recession the company not only reaped profits but also maintained its niche in the luxury market. It also ensured customer royalty and customer retention for the company while at the same time boosting sales.(Ferrell, 2012)
General Motors vs. Ford Motors
While Ford Motors is heavily reliant on the free social media platform for major advertising of products General Motors on the other hand invests on a system that relies on the services of a professional advertising agency. The advantage of this is that it is way easier to evaluate the outcome of advertising via the advertising agency than it is to evaluate the outcome of advertising through social media. However social media advertising used by Ford is way cheaper than hiring the services of an advertising agency by the General Motors.
While the promotional strategies of General Motors are tailored to bring numbers to the company, the promotional strategies of Ford Motors are tailored to maintain customer loyalty by standing out as a concrete model especially in the luxury car industry. The outcome of the two strategies is that while GM ends having a greater consumer base at a competitive pricing, Ford Motors on the other hand gains quality customers at a sustainable and relatively high pricing.(Maria, 2001)
Comparison of marketing, pricing and promotional strategies between General Motors and Ford Motors
Both companies are successful in their respective marketing strategies. This is because both of the manufacture automobiles for slightly different markets. Though their markets interact at a high margin they still manage to maintain significance in their respective markets. The promotional strategies from both companies are also a great success as both of them have been able to maintain their customer base with Ford actually showing growing customer base in the last academic year.
There is still a large untapped market globally. In order to tap into this market, a company in the automotive industry needs to design products with more competitive pricing especially for the low end market. Another strategy involves manufacture and marketing of automobiles as environmentally friendly. There is a lot of attention globally with consumers being encouraged to use environmentally friendly cars that leave less or no carbon footprint as opposed to the current models. A very successful marketing model is the one in which the customers with electric cars are provided with free towing facilities along the roads and also free exchange batteries. Batteries are currently the most expensive component of hybrid and electric cars and hence such an incentive is 100% likely to be successful.
There are also newer markets especially in developing countries e.g. in Africa. Each day the road infrastructure in Africa is in current growth. The companies can use this information to take more production lines to Africa since this is cheaper than exporting complete units.
In the current condition in the automobile market, successful marketing strategies include the social media. This is necessitated by the rise in popularity of internet communication. It is also free hence by reducing the cost of advertising the company can be more profitable. The use of advertising agencies is also a successful because of the ease to evaluate the success of such a model. Competitive pricing is also the best pricing strategy in the current market because it will help any automobile company to maintain significance in the automobile industry. This is what has helped the Asian automobile manufacturers like Toyota to colonise new markets.
Betz, Frederick. (2002). Executive Strategy: Strategic Management and Information, pp. 1-14
Canadian auto dealer, (2014) GM develops new global marketing strategy <https://canadianautodealer.ca/2013/01/gm-develops-new-global-marketing-strategy/
Ferrell, O. C. and Michael H. (2012). Marketing Strategy, pp. 223-234
Ford, (2014).Our Strategy - Sustainability 2011/12 - Ford Motor Company <http://corporate.Ford.com/microsites/sustainability-report-2011-12/blueprint-strategy
General Motors, (2014). General Motors | Investors - Corporate Strategy | <http://www.gm.com/company/investors/corporate-strategy.html
Maria Isabel Studer Noguez, (2001). Ford and the Global Strategies of Multinationals, pp. 17-29